The Chairman of the SEC, Gary Gensler, recently claimed in an interview that all cryptocurrencies, except Bitcoin, fall under the agency’s jurisdiction. However, his comments have been disputed by lawyers for the cryptocurrency industry who argue that the SEC must prove its case in court for each token individually before it can claim jurisdiction over them.
Jake Chervinsky, a lawyer and policy lead at the crypto advocacy group the Blockchain Association, argued in a tweet that Gensler’s opinion is not the law, despite his claimed command over the crypto sector. He further stated that until the SEC proves its case in court for each individual token, it lacks authority to regulate any of them.
Another lawyer, Logan Bolinger, also pointed out that Gensler’s opinions on what is or isn’t a security are not legally dispositive, meaning that it’s not the final legal determination. He added that judges, not SEC chairs, ultimately determine what the law means and how it applies.
The policy lead at the Bitcoin Policy Institute, Jason Brett, said that Gensler’s comments should be feared rather than celebrated. He stated that there are ways to win other than via a regulatory moat.
Gabriel Shapiro, the general counsel at investment firm Delphi Labs, outlined in a series of tweets the enforcement difficulties the SEC would have to carry out on the industry to cement its rule. Shapiro pointed out that according to Gensler, over 12,300 tokens worth around $663 billion are unregistered securities that are illegal in the U.S. The SEC would have to file a lawsuit against each token creator, which would be seemingly impossible to enforce.
Shapiro also noted that the SEC has handled crypto in two ways: either fining token creators and requiring the issuer to register, or fining them and ordering the created tokens to be destroyed and delisted from exchanges.
The comments made by Gensler have sparked concern in the cryptocurrency industry. Lawyers have highlighted the need for the SEC to prove its case in court for each token individually before it can claim jurisdiction over them. Meanwhile, the SEC faces the seemingly impossible task of enforcing its rule against over 12,300 tokens. The situation remains unresolved, and the crypto industry will be closely watching to see how it develops in the coming weeks and months.